Jadestone Energy Inc., an independent oil and gas production company focused on the Asia Pacific region, reported its consolidated audited financial statements, as at and for the year ended December 31, 2019.
- Jadestone reports record annual production, revenue, EBITDAX, operating cashflow, profit before tax, and profit after tax, with the benefit of a full year contribution from Montara;
- 2019 full year net revenue of US$325.4 million, a nearly three-fold increase over 2018 of US$113.4 million;
- Liftings for the full year were 4,496.2 mbbls, compared to 1,683.1 mbbls in 2018, reflecting a full year of Montara production of 3,826.1 mbbls;
- Average price realisations for 2019 were US$69.07/bbl, compared to US$69.39/boe in 2018, with the increase in pricing premia for each of Stag and Montara offsetting the year-on-year reduction in Brent;
- Full year 2019 adjusted EBITDAX of US$187.51 million, which compares to US$10.21 million in 2018;
- A more than 20% reduction in unit operating costs, generating an average cash cost per barrel for 2019 of US$22.85/bbl, before workovers, and compared to US$28.72/boe in 2018;
- 2019 full year positive net cash generated from operations of US$176.7 million, before changes in working capital, tax and interest, compared to a US$0.3 million net use of cash in 2018;
- Annual pre-tax profit of US$73.3 million, compared to a pre-tax loss in 2018 of US$21.5 million;
- Full year 2019 profit after tax of US$40.5 million, compared to a net loss of US$31.0 million in 2018;
- Gross debt outstanding reduced to US$49.12 million by year-end, compared to US$101.8 million at December 2018. Following the March 2020 scheduled repayment of US$12.9 million, the principal balance outstanding is now US$37.32million;
- Gross cash and bank balances of US$89.43 million at year-end, resulting in a net cash position of US$40.32 As at March 31, 2020, gross cash and bank balances had grown to US$109.42 million, or a net cash position of US$72.12 million; and
- On November 18, 2019, the Company announced the acquisition of an operated 69% interest in the Maari Project, shallow water offshore New Zealand, for a total headline cash consideration of US$50.0 million.
- Continued safe operations at all assets, with no significant recordable personnel or environmental incidents;
- Full year average production of 13,531 bbls/d, reflecting a full year of operations from the Montara asset, in addition to the Stag field, a more than three-fold increase on average production in 2018 of 4,057 boe/d;
- All outstanding regulatory deficiencies at Montara, which were inherited when the asset was acquired, have been corrected, and we have operated for the remainder of the year without any regulatory enforcement notices;
- Successfully conducted the first phase of major investments on Montara, including a subsea umbilical replacement, and innovative riserless light well intervention (“RLWI”) programme, to restore gas lift and access additional reservoir sands;
- Drilled the first infill well on Stag in six years, which successfully came on production at 1,400 bbls/d in line with pre-drill expectations, producing throughout the year as planned; and
- 2P reserves at December 31, 2019 of 41.8 mm bbls comprising both Stag and Montara, a decrease of 1.0 mm bbls from December 31, 2018. Inclusive of Maari’s 2P reserves (as evaluated at the time of acquisition, net of planned 2019 production) Jadestone’s 2P reserves have effectively increased 26% year-on-year to 54.0 mm bbls.
- The Company’s maiden dividend payment to shareholders is on track for later in 2020, with a targeted range of US$7.5–12.5 million;
- To further insulate the balance sheet in the wake of the COVID-19 pandemic, 2020 capital spending has been reduced by around 80% from US$160–190 million to US$30–35 million;
- Ongoing downside oil price protection through the Company’s capped swap, which provides a floor price of US$68.45/bbl (Dated Brent) through to September 30, 2020, on 50% of Montara planned production, excluding incremental oil price premia;
- Project Clover, Jadestone’s current Company-wide cost efficiency and capital saving programme, has to date identified incremental savings in 2020 of US$3-4/bbl that can be realised going forwards;
- The Company’s operating cashflow break even oil price for the remainder of 2020 is estimated to have been reduced to US$20/bbl. Unlevered free cashflow break even oil price for the same period is estimated to be below US$27/bbl;
- Montara and Stag infill drilling has been deferred to coincide with a strengthening oil price environment, together with the potential to lock-in lower service costs next year;
- 2020 production guidance of 12,000 – 14,000 bbls/d for the year, adjusted to reflect a re-scheduling of Australia’s infill wells into 2021 to maximise returns;
- The Company has elected to defer entering into the mandated amended and enlarged reserves-based loan, given the reduced capital programme, with all existing debt repaid within 12 months based on current schedule;
- AU$60.0 million locked in via forward exchange contracts at an AU$/US$ exchange rate of 0.6344, saving ~US$4.0 million versus the assumed costs in the 2020 work plan & budget;
- Growth through the addition of an operated 69% interest in the Maari project, offshore New Zealand, with closing still expected in the second half of 2020; and
- Ongoing pursuit of inorganic growth opportunities.
Paul Blakeley, President and CEO commented:“I’m very pleased to report a transformational year for Jadestone in 2019, though it may well be overshadowed by the extraordinary circumstances that the world finds itself in today. The global economy has been dealt a huge blow by the COVID-19 pandemic, with significant oil demand destruction, exacerbated by OPEC+ disarray, and a lack of storage, such that we envisage a prolonged impact on oil pricing for which we need to be prepared. So, while I would like to reinforce how the Jadestone business has moved forward with a threefold increase in revenue to US$325 million, as well as US$177 million of operating cashflow, it’s also important to emphasize that we have elected to defer 80% of our capital spend this year, in order to protect the balance sheet. We recently announced the deferral of the Nam Du/U Minh gas project in Vietnam by 12 months, and yesterday we confirmed that the two infill wells which were to be drilled this year in Australia will now be pushed back to 2021.
“In 2019, our Stag and Montara producing fields delivered an average increase in uptime performance of 12% to 80% overall, and operating costs came down by 20% in the same period to US$22.85/bbl. This was a result of a number of cost reduction and efficiency initiatives, with more to come in response to the current environment. In November last year we also announced the acquisition of the Maari project in New Zealand. So, while we balance prudence at this challenging time, with deferred drilling and a resulting downward guidance of 10% to production volumes this year, this is balanced by closing the Maari acquisition which will provide a 25% production increase next year.
“2019 also benefited from a threefold increase in crude oil sales, due largely to a full year of Montara production, enhanced by half of the produced volume being sold at US$72/bbl, and with strong premiums on top. This hedging programme will continue through to September this year and will be a major positive feature in our ability to generate positive free cash even at today’s depressed prices down to US$20/bbl.
“Jadestone has acted quickly in response to the challenges imposed by the COVID-19 pandemic and put in place comprehensive procedures to ensure our operations remain unaffected, and can continue safely and efficiently. We have adjusted how we work both onshore and offshore to minimise the risk of infection and to protect the wellbeing of our people. Contingency plans for safe crew transfer, local housing for self-quarantine, and isolation and evacuation procedures are all in place.
“On a positive note, I would add that we will shortly publish a full annual report, and our first sustainability report which is part of our commitment to provide more information and transparency in our business. We will set comprehensive targets towards a sustainable future, which will be measured in parallel with operational and financial objectives, and will become a part of our core business ethos. This is important because we intend to be here for the long term, with a strategy that fits the times, and we are well positioned to benefit from the current challenging environment with both organic and inorganic opportunities. We have a strong balance sheet, which has grown significantly with gross cash at US$120 million at the end of March 2020, including a US$10 million bank guarantee, with remaining debt of US$37 million.
“Finally, due to its financial strength, the Company will pay its first dividend later this year as promised, will continue to work towards closing the Maari acquisition later in the second half of the year, and will also remain opportunistic for inorganic growth should the right opportunities emerge.”
Jadestone reported its first full year of results for the Montara Assets in 2019, following completion of the acquisition in late September 2018. Montara production averaged 10,483 bbls/d for the full year 2019, compared to 7,625 bbls/d for the post acquisition period September 28, 2018 to October 31, 2018, prior to the voluntary shut-in during November and December 2018, to address an inspection and maintenance backlog.
There were a total of six Montara liftings in 2019, resulting in total sales of 3,577,204 bbls, compared to the year ended December 31, 2018 which saw just one Montara lifting for total sales of 451,291 bbls.
During 2019, Jadestone conducted its first major investments on the Montara assets, including successfully installing replacement subsea umbilical cables. The umbilical cables are an essential part of the control system providing electrical power and control signals to the subsea well-heads, thereby enhancing long-term reliability of production from the subsea wells.
In addition, the Company conducted the innovative RLWI campaign at the Montara complex, undertaking a highly engineered scope of work to restore gas-lift to subsea wells, and to access additional reservoir sands. The RLWI programme achieved its objectives, completing the work at a substantially lower cost than would have been incurred using a more conventional jack-up drilling unit.
Production from the Stag oilfield averaged 3,049 bbls/d for the full year ended December 31, 2019, compared to 2,799 bbls/d for the year ended December 31, 2018. The increase was due to the Stag 49H infill well, which was drilled in May 2019 and initially produced at approximately 1,400 bbls/d upon completion, and thereafter at a rate averaging 838 bbls/d between May 22, to December 31, 2019. The additional production was partly offset by downtime associated with cyclones in 2019, and delays to workovers during the period that the 49H infill well was being drilled.
There were four Stag liftings in 2019, resulting in total sales of 918,961 bbls, compared to the year ended December 31, 2018 which saw five liftings and total sales of 1,031,763 bbls.
In Vietnam, the Company made substantial progress toward commercialising its Nam Du and U Minh gas fields, including completion of front end engineering and design work, selecting major suppliers, signing a heads of agreement in respect of key gas sales commercial terms, and submitting a field development plan (“FDP”) in respect of the development. While the Company remains committed to developing the fields, in the absence of receipt of Vietnamese Government approvals of the FDP, and in light of prevailing market conditions due to COVID-19, the Company opted to delay any further work, and anticipates no further major spending on the project in 2020.
COVID-19 operational response
Jadestone has undertaken a thorough assessment of all aspects of its operations, and the specific risks and challenges posed by the COVID-19 pandemic. As an overarching principle, the Company will comply with local and international recommendations protecting the wellbeing of its people, and in turn to minimise the impact on its operations.
The Company has adjusted its offshore work rotation to reduce travel time and is providing local accommodation for personnel to self-isolate following cross-border travel in Australia. Health and wellness screening has been enhanced for all operational personnel, including pre-duty temperature checks and staff questionnaires. Offshore work plans have been modified to defer non-essential activity wherever possible, such that manning can be kept to a minimum in order to provide crew flexibility and additional cover in the event of any infection. Isolation and evacuation procedures are in place.
To this point, the Company has not experienced any disruptions to its offshore operations due to the COVID-19 pandemic. Jadestone is in frequent discussions with the relevant Australian Government and regulatory authorities and continues to execute key projects to enhance efficiency while operating within the requirements of its safety cases. As the public health response to COVID-19 remains fluid, Jadestone has designated a pandemic manager at each location, to ensure a coordinated and principled response to evolving business requirements.
Jadestone recognises that ongoing safe operations rely on a working supply chain to ensure provision of critical equipment, consumables, and services. The Company is maintaining a rolling six-month work plan for all offshore work and believes it is carrying a sufficient local inventory of critical spares to safeguard operations. However, in light of the potential for unforeseen disruptions to the supply chain, the Company has implemented additional new measures to enhance logistics support and transportation, including closer cooperation with nearby operators.
Jadestone has also implemented a travel ban, and work-from-home routines are in place, as an extension to the Company’s standard operating model which relies on a distributed workforce. In addition, the Company has enhanced its support for personnel working from home to ensure efficient online collaboration, communications, and that decision-making can continue, as seamlessly as possible.
An independent third-party reserves evaluator, ERCE, has audited Jadestone’s Montara reserves and reviewed the Stag reserves, as of December 31, 2019 in a report dated April 23, 2020. As of December 31, 2019, the Company had proved oil reserves of 25.1 mm bbls, a decrease of 0.2 mm bbls from December 31, 2018. On a 2P basis, the Company had 41.8 mm bbls of oil reserves at December 31, 2019, decreased by 1.0 mm bbls from December 31, 2018. The difference in reserves reflects the impact of oil production during the year largely offset by reserves upgrades due to strong reservoir performance, as well as including technical revisions relating to an additional future infill well being included in the Company’s future production profile.
The Company’s reserves value, based on after income tax values of future net revenues discounted at 10% were evaluated to be US$253 million for proved reserves, and US$549 million on a 2P basis, as of December 31, 2019.